How to buy Bitcoin or any other alternative cryptocurrency such as Ethereum, Litecoin or other Altcoins?
Many people want to get on the board of investing in the cryptocurrency frenzy that is going on lately. Bitcoin and many other cryptocurrencies experience stellar growth in the last 6 months and it created many millionaires in the process. I personally know people who retired in last couple of months or are in the process of retiring. Early adopters were buying Ethereum coins for under a dollar in thousands of coins.
For many people this is a foreign territory as it is different for what they know. Bitcoin mining, wallets, hash addresses? What does it all mean? Even seasoned investors have difficulties as this is a new breed of investment instruments. The volatility of crypto coins is massive, some coins go up as much as 500% in a day or even lose 90% in one day so it is a risky business and you have to know what you are doing. So doing some homework is crucial in order for making a safe investment and I don’t mean only what coin to buy, when to buy and sell it but also where to open your account as some exchanges get hacked and people lost some money. There are also cases where some exchanges shut down, went bankrupt and people lost their money.
So how does investing in or buying Bitcoin and other cryptocurrencies work?
In order to buy any cryptocurrency you have to open an account in a exchange that offers them. Most of the exchanges that offer fiat currency deposits offer only a small repertoire of all available coins. So if you want to but only Bitcoin, Ethereum or Litecoin you can just open an account on a exchange such as Coinbase and that is it. However if you want to buy some Altcoins you will have to open a second account on another exchange where they offer a bigger number of cryptocurrency coins. There are more than 700 alternative coins or Altcoins for short there is no exchange that offers them all. As I already mentioned most of this exchanges that do offer Altcoins don’t support fiat currency (such as dollar, pound, euro or other currency) deposits. So you will have to but Bitcoins or Ethereum coins and transfere them to an exchange that offers the Altcoins you are after.
You must however have a solid trading plan for trading crypto currencies. You should never invest money you are not able or willing to lose as this is a high risk investment.
Even if you think it is complicated as you have to open accounts on different crypto currency exchanges it is actually quite painless, at least it was in my case. Opening an account takes only a couple of minutes. You will have to verify your identity in order to deposit fiat funds to the exchange.
Now I have tested a couple and I must say that Coinbase has the best and fastest system. I did hear however in some cases that their automated process fails for some reason or another but for me personally I had a verified account in matter of 20 minutes and no other exchange did verify my account so fast.
I have written an article where I compare and review Coinbase, Kraken, Bittrex and Cex.io exchanges. Please read it to see what are the differences and what was my experience with them, especially why I wouldn’t recommend using Kraken
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Once your account is verified you can deposit your fiat currency and buy Bitcoin or Ethereum, now I must mention that they have different levels of verification and in order to deposit bigger amounts of money you have have to go over stricter verification. In my case I had a 500 eur limit per week which is enough for now as I don’t even want to buy more at one time.
OK now you have your account and you can start buying or selling Bitcoin, Ethereum and Litecoin in case you are on Coinbase. Now if you wish to buy other crypto currencies you will have to open another account on a exchange that also offers other alternative coins. I would recommend Bittrex, as they offer the biggest number of altcoins and they also have one of the highest volumes of all exchanges which results in high liquidity and you want to have high liquidity.
I will describe the process of opening an account on Bittrex and depositing Bitcoin or Ethereum to Bittrex, but even if you are opening an account somewhere else the process should be similar.
As you are not depositing fiat money directly to Bittrex, the account verification is less strict, however if you want to move bigger amounts of money you will still have to go through a more strict verification procedure.
Once your account is verified you can deposit any crypto currency directly to you Bittrex wallet. Now every coin has it’s own wallet and you have to deposit your coins to the correct wallet otherwise you will lose your deposit. So for example if you are sending Bitcoins you have to send them to your Bitcoin wallet address, if you send them to your Ethereum wallet address you will lose all your Bitcoins, so you have to be extra careful when doing this.
I have written a more detailed description on how to transfer Bitcoin from Coinbase to Bittrex here.